tv Nightly Business Report PBS January 21, 2011 6:30pm-7:00pm EST
>> our job is to do everything we can to ensure that businesses can take root, and folks can find good jobs and america's leading the global competition that will determine our success in the 21st century. >> susie: president obama goes on the stump for jobs tapping g.e.'s c.e.o. as a key advisor. the move comes as the big you're watching "nightly business report" for friday, january 21. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. my colleague tom hudson is off tonight. another business-friendly announcement from the white house today. president obama named general electric's c.e.o. to head up a new jobs council and also made him his chief outside economic advisor. speaking at a g.e. plant in schnectady new york, the president said he chose jeff immelt because he can find new ways to promote private sector hiring. >> the past two years were about pulling our economy back from the brink. the next two years, our job now,
is putting our economy into overdrive. >> susie: immelt's appointment came just hours after g.e. reported better than expected quarterly numbers and a big jump in new orders. g.e. earned 36 cents a share, four cents more than analyst estimates. that's a gain of 33% compared to a year ago. looking ahead, immelt said he expects earnings growth will continue this year and next. so what does g.e.'s positive forecast mean for the u.s. economy. suzanne pratt reports. >> reporter: g.e. has long been considered a bellwether for the u.s. economy. that's because of its ginormous size and broad range of business-- everything from transportation to healthcare. today, g.e. reported its first increase in revenue in two years. analyst daniel holland expects g.e.'s recovery to accelerate. >> the company is getting much closer to firing on all cylinders. as we come through 2011 and going into 2012, you're really
going to have g.e. performing the way that management would like it to see it performing and operating in the areas that g.e. considers core. >> reporter: that's good news for the u.s. economy and for those worrywarts still fretting about the pace of recovery. after all g.e.'s balance sheet is perking up because more company's are buying more of the things that g.e. sells. what better vote of confidence in the economy than some serious capital spending. >> that's really g.e.'s specialty is in big equipment, power generation equipment, healthcare equipment, engines things like that. and, so now we see more companies willing to put forth orders. >> reporter: still, some experts point out it's not just american companies that are more optimistic about the future. economist anthony chan says don't forget the global marketplace. >> many of the companies in the s&p 500 basically rely on global economic activity for a good chunk of their earnings and
certainly a good chunk of their revenues. so, global economic activity picking up. and, now the good news is that our own domestic economic activity is showing greater signs of life. >> reporter: even if the u.s. economy is showing greater signs of life, it's still lagging in a crucial area: jobs. hiring is expected to increase this year. but, not by enough to significantly reduce the nation's jobless rate. >> in 2011, we can get some get some good news on job creation and that will result in an unemployment rate somewhere in the neighborhood of near nine percent by the end of the year. not great but certainly an improvement. >> reporter: the better americans feel about the economy. the more people come out and look for work. experts say an expanding labor force is another reason the unemployment rate is likel to stay stubbornly high. suzanne pratt, "nightly business report," new york. >> susie: here are the stories in tonight's n.b.r. newswheel: those g.e. earnings gave a boost
to blue chip stocks. the dow added 49 points, the nasddaq fell 14 and the s&p 500 up three. trading volume ended the week at its lowest/highest level with 1.2 billion shares moving on the big board and 2 billion on the nasdaq. the nation's employment crisis took a big toll on labor unions last year. public and private sector groups lost 600,000 members. there are now less than 15 million union members in the u.s. or almost 12% of the population. more funding for facebook: it's raised $1.5 billion in recent weeks. that includes the recent private placement by goldman sachs, which valued the social network at $50 billion. the money will be used for expanding facebook's operations. and if you take your iphone 4 into an apple store for repair. you might be in for a surprise. the stores are now putting tamper-proof screws on those phones, according to a reuters report. apparently, it's to prevent people from taking the phones apart.
but, apple has not told customers about the switch. no comment from apple. >> i love the car. i mean, it's done everything they've advertised on. >> susie: the nation's first chevy volt owner takes us on a test drive. some subtle signs that china is willing to let its currency appreciate. treasury officials say there was progress made on this touchy issue during this week's state visit with china's president hu jintao. the chinese yuan has been going up against the dollar, but u.s. officials would like to see a faster pace of appreciation. many u.s. economists and politicians have argued that china has unfair competitive advantage in international trade because it holds down the value of its currency. that practice makes chinese exports cheaper. meanwhile, china's biggest bank is taking control of a u.s. based bank. the industrial and commercial bank of china will reportedly pay $100 million for a major
stake in the u.s. division of the bank of east asia. according to the wall street journal, it's the first chinese lender to buy into an american retail bank. the deal, which comes on the last day of chinese president hu's visit, is likely to be carefully reviewed by u.s. regulators. speaking of u.s. regulators, china says it'll work closely with the u.s. federal aviation administration on certifications for its c9-19 passenger jet. the jet is china's entire into the global aviation business. its being built by the commercial aircraft corporation of china-- a state controlled firm. the plane, would hold 190 passengers and compete head on with the boeing 737 and the airbus a320.
>> susie: encouraging earnings from general electric and an upbeat outlook inspired blue chip investors today. let's take a look in tonight's market focus. the dow managed a healthy gain. here's the intra-day trade. the dow started to the upside and stayed there to the end notching a 49-point gain. the dow has been on a healthy upswing rising every week for the past eight weeks. it was the only major index to eke out a small gain in this shortened trading week.
up 84 points or less than 1%. the nasdaq composite fell in three of the past four sessions for a loss of 65 points or almost 2.5%. losses at apple played a big role in that weekly decline. and the s&p 500 went two for two this week for an overall loss of nearly ten points. of the s&p sectors, materials and financials were hardest hit this week. the materials were under pressure as worries heated up over china's need to reign in growth, while the financials were clouded after a week of earnings hits and misses for some of the biggest banks. bank of america-- the latest big bank to report and the only one this week with a loss stemming from its troubled mortgage operations. the company warns it may have to set aside up to $10 billion to cover settlements with mortgage investors. but on today conference call, c.e.o. brian moynihan said he is optimistic for a dividend boost in the second half of the year.
b. of a. posted a loss of 16 cents per share. analysts were expecting a profit. revenues also fell short, marking a third straight quarterly decline. the stock fell 2% today, but despite that bank of america shares are still the best performing dow stock over the last eight weeks. in other earnings news, schlumberger, the world's largest oilfield services firm, delivered healthy profits and an upbeat outlook and that led to some profit taking. the stock fell $1.80 or 2%, but it has been on a tear, rising 60% since it closed on its $11 billion purchase of smith international last summer. that deal boosted schlumberger's fourth quarter profits. earnings climbed nearly 30% to 85 cents per share. while revenues surged 58% to just over $9 billion. the company said today it's not worried about the recent jump in oil prices and today the board approved a 19% increase in its
quarterly dividend. let's take a look at two stocks that benefited today from speculation about buyouts: first hugh communications jumping nearly 20%. reuters is reporting that the company has hired barclays capital to evaluate strategic options, including a sale of the maryland based satellite services provider. next, pep boys shares got a nice pop: up 15% on a bloomberg report that its seeking a buyer. the news pushed the auto parts retailer to a fresh three-year high. next week will be another big week for earnings. two dow components scheduled to report on monday: american express and mcdonalds. ahead of that, american express shares gained 73 cents or almost 2%. analysts are looking for earnings of 95 cents a share on revenues of $7.3 billion. by contrast, mcdonald's shares lost just a bit of ground ahead of monday's earnings down 15 cents.
quarterly results are due out before the opening bell. investors will be looking to see how the global fast food giant is coping with rising food costs. and that's tonight's market focus. >> susie: when you think of a fast food giant, the golden arches probably comes to mind. but in china these days. mcdonald's faces growing competition from the chain country-style cooking. as nick mackie reports, the restaurant's menu of low cost chinese meals is on a roll not a bun.
>> reporter: she studied catering at a chongqing college in the '80s, went on to manage a chain of local noodle eateries, before opening her first outlet here-- a k.f.c. clone-- in 1996. but li hong had problems trying to mimic the big brand on taste. so, with her husband, she focused on what local consumers prefer-- chinese dishes, with a hot peppery twist. they went on to open a new restaurant every year getting a name for offering hearty meals for under $2. >> ( translated ): of course, we never thought that after a decade we would list. but your goals change as time goes on. when the chance arises, you grab it. >> reporter: in 2007, backed by sequoia capital and sig china, country style cooking, with li hong as ceo, began expanding rapidly. by september's i.p.o., it had 101 outlets, mainly in sichuan and its headquarters city of chongqing, where it's now the
largest counter service chain. >> ( translated ): i prefer chinese fast food because i'm used to the taste. >> i prefer western fast food because the outlets are really nice. but for most people, they're more used to chinese fast food. >> reporter: c.s.c.'s first half revenues in 2010 reached $48 million, $4 million in net income from 1,600 customers per day per restaurant. the company's recipe for growth is founded on what the young husband and wife team learned back in the '90s. in sichuan, people like their food spicy. so with a menu that satisfies the local tastebuds, country style cooking could well oust the u.s. brands from their dominant position in this region's fast food restaurant sector-- a region with a population on par with western europe. local appeal, low cost to consumers and a huge urbanizing population, the conditions for growth appear sound. but as country style cooking expands its south west china
footprint, so do the pressures: supply chain management, quality control, rising wages and food costs. professor pu yongjian of chongqings school of business administration says, for any home-grown company, sustaining a challenge on the long established global players dominance will be difficult. >> ( translated ): those western brands in the chinese market are big names worldwide. no matter if it's their management or their finances they have an advantage. chinese fast food firms have a long way to go to catch up, but i think they can share certain markets. >> reporter: li hong says she's not competing directly with the highly successful u.s. brands as, up to now, they've mainly focused on attracting the youth market, unlike c.s.c. which appeals to all ages. and in this region, while few consumers opt for western food on a daily basis, her outlets have loyal regulars. >> ( translated ): our service can free them from their chores around the house. we can be their back kitchen. it's becoming the latest lifestyle in chongqing and the west of china.
>> reporter: but in china, success breeds copycats. c.s.c. has a good head start in the region, but it should be braced for new chinese fast food competition and that could include one chain backed by none other than k.f.c.s parent, the yum group. nick mackie, "nightly business report," chongqing. >> susie: here's what we're watching for next week: our market monitor is erik ristuben, chief investment officer of client investment strategies at russell investments. also a big week for earnings: dow components 3m, american express, a.t.&t., boeing, catepillar and microsoft. on monday, our shoptalk series look at private sale websites and why they're one of the hottest trends in retail. more turbulence for british airways. the airline's cabin crew has voted to go on strike again. so far, no date has been set for the walkout. b.a.'s fight with its unions began last year over proposed cuts in pay and staffing levels.
now it centers on a withdrawal of perks for union members who went on strike last year. but the airline's news isn't all bad. today, british airways formally merged with spanish carrier iberia, creating europe's third- largest airline. meantime, u.s. airways inked a deal with expedia. the online travel site will provide u.s. airways fare and flight data for several more years. travelers will also have the option of selecting premium seats for an extra fee. financial terms of the deal were not disclosed. the agreement comes as rival american airlines is embroiled in a battle with online travel sites. expedia dropped american fares from its site earlier this month.
our market monitor guest tonight says there's no reason to be pessimistic about investing in stocks. he's hank smith, chief investment officer, of haverford trust. this philadelphia firm manages $6.5 billion. hi, hank. and welcome to the "nightly business report" as a first time being a market monitor. so, hank, let's stewart with-- what's the reason to be optimistic about investing in stocks? >> well, first of all, you have an economy that is starting to reaccelerate from worriesave
double-dip recession back in the summer. now we have monetary policy that's stimulative and an administration becoming probusiness. so g.d.p. estimates are coming up. most importantly, earnings are still on the rise. and valuations remain very attractive. and we're starting to see a shift from very pessimistic sentiment toward positive sentiment. so, yes, there are risks out there, but when you compare the tailwinds to the headwinds, we would be a buyer of equities here. >> suzanne: all right, let's see what equities you would be buying. you say that a number of your recommendations tonight would benefit from the recovering economy, and at the top of your list is johnson control. tell us about j.c.i. >> sure, j.c.i. has a couple of areas that are going to benefit from an improving economy. one, they're tie to the auto industry. they manufacture a lot of the
neat gizmos in seats and in your dashboard. and with pent-up demand for auto sales, we think this is going to be a very good investment, along with a play on kmerb building, and a green technology play as buildings get retrofitted to be more environmentally friendly. >> suzanne: all right, let's move on to. whirlpool, whu. you see this as an early play on the pickup in the housing sector. >> that and pent-up demand from consumers that had delayed big-ticket purchases, whirlpool is arguably the biggest quality brand name in appliances with kitchenaid, maytark whirlpool, but that's an emerging market with 50% exposure to emerging mark where's you're seeing the development of the middle class and the beginnings of purchases of things we take for granted like dish washers and washing machines. >> suzanne: absolutely.
you have a financial here that you like, j.p. morgan. what's the attract, j.p.m. on the syne. >> the best managed bank in the world, not just the country, with a fortress-like balance sheet, and with normallized earnings of 6.5 dollars by 2013, this is a very attractive and very cheap stock today. >> suzanne: and you're also counting on aggressive dividend hikes at j.p. morgan, right? >> we think just as they led the banking industry in reducing their dividends, it kind of gave us the all-clear seen to do that they are going to be the leaders to increase the dividends. we look at multiple dividend increases over the next several years. >> suzanne: we have about a minute left. squeeze in and tell us about the last two stocks you call steady-edies. there's wal-mart and mcdonald's. >> sure, you can't avoid the defensive side of the market, and these two are the most classic defensive companies. in fact, theatre only two dow
jones stocks that had positive returns in 2008. they provide very predictable, consistent earnings growth and very attractive valuations in here, and mcdonald's, a very healthy yield as well. >> suzanne: all right. hank, do you have any disclosures. do you own any of these oh, did haverford do any banking with any of the stocks you recommended? >> haverford owns all five stocks. i personal plea own all five stocks as well but we have no banking relationship. >> suzanne: we hope to get you back in a few months and review the stock picks. thank you so much for coming on the program. our market monitor tonight, hank smith, chief investment officer of haverford trust. the north american international auto show is wrapping up in detroit this week. the chevy volt was in the spotlight as the car of the year. but will the electric powered vehicle catch on with buyers? jeff kaffee, a former toyota prius owner, was the first person to take delivery of the volt.
tonight, he gives us his review after a month behind wheel. ♪ >> this g.m. was put together very, very well. they use to have a commercial this isn't your father's oldsmobile but this truly isn't my old chevrolet station wagon. i mean fit and finish are very good. i know i sound like a g.m. promo guy but the car came through. it's the only product out there today that works and it was the next car that was really a quantam leap above what was out there. the car is quick. the car holds the road very well. extremely quiet and just an enjoyable ride. one of the reasons i got this car is it's a lot more flexible for me.
this is brand new technology and it allows you to go on electric alone i remember 1974 when i lined up for five hours for five gallons of gas when we had the fuel shortage here. today, we don't have the fuel shortage but we import more oil than we did before. i don't know we're very susceptible to another outage if politics get bad in certain areas but i like the fact that i have 40 miles. i can utilize the car without any gasoline what so ever. and it's a lot cleaner burning than anything else on the road now. my only negative comment on the car is it doesn't have that fifth seat in the middle but my comment was in the last 20 years you don't have any six passenger cars unless you're going to the vans.
this is more where i'm at today i mean i have more of a green outlook on life. >> susie: that's "nightly business report" for friday, january 21. i'm susie gharib. have a great weekend. we hope to see all of you again next week. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org vo:geico, committed to providing service to